Drug coupons – Giving to Peter but taking from Paul?

Drugs are expensive, we all know. But, don’t those drug coupons that many manufacturers offer help to offset high co-pay costs? It all depends on who’s buying the drugs.

Put simply, according to a story in the New York Times, co-payment coupons can actually increase total health care spending by encouraging patients to choose more expensive drugs when there are lower-priced substitutes available. Those high costs can then boomerang back to patients in the form of higher insurance premiums

The Times story focuses on a New England Journal of Medicine report. According to that analysis: “Not only do co-payment coupons have the potential to pull consumers away from high-value drugs, they also greatly reduce the incentive for drug manufacturers to offer price concessions in exchange for preferred (drug formulary) tier placement. In fact, the opposite strategy becomes profitable: charge insurers the highest price possible while remaining on the formulary, and then use a co-payment coupon to promote use. The only recourse insurers have is to exclude a drug from their formulary entirely, and that may be much worse for patients than placing it in a high tier. If a drug is excluded, some patients will lack both coverage and a negotiated discount for a drug that might be a particularly good match for them.”

Coupons boost revenue

Authors Leemore S. Dafny, Ph.D., Christopher J. Ody, Ph.D., and Matthew A. Schmitt, Ph.D. report the number of these coupons has “skyrocketed” between 2007 and 2010: the revenue from brand-named drugs offering copayment coupons more than doubled. They believe that patients would rather use a coupon to pay for a brand-name drug than use a less expensive generic.

The report estimates, in fact, that coupons increase the percentage of prescriptions filled with brand names, rather than with generics, by more than 60%. In terms of dollars, the estimate is that for the 85 drugs the authors studied, all of which had generic competitors, spending on the 23 that offered coupons was $700 million to $2.7 billion higher than it would have been if the coupons had not been issued.

Quoted in the Times story, Dr. Dafny says the coupons “are wolves in sheep’s clothing. These efforts to help consumers bear the cost of their drugs are actually driving higher spending without commensurate health benefits.”

About the Author

Ed Tobias brings more than four decades of reporting and news management experience to his work at Rx411. Tobias managed news coverage for Associated Press Radio for over twenty years. This included coverage of the 9/11 attacks, the Iraq War, Hurricane Katrina, the death of Princess Diana, the Challenger and Columbia shuttle disasters and national election primaries, conventions and campaigns. He was part of the team that built AP’s on-line video operation. Prior to joining AP, Tobias was News Director at all-news WTOP in Washington, D.C.